Stock Market & Financial Investment News

JDSU falls after outlook disappoints, analyst downgradesShares of JDSU (JDSU), a provider of equipment to telecommunications service providers, are sharply lower after the company's fourth quarter results and first quarter guidance were reported last night. Following the report, the stock was downgraded this morning at two Street research firms. WHAT'S NEW: Last night, JDSU reported fourth quarter adjusted earnings of 14c per share, beating the consensus forecast by 1c, on revenue of $448.6M, which topped the consensus $436.8M view. However, JDSU expects revenue to be $405M-$425M in its first quarter and sees Q1 EPS of 8c-12c, which fell short of consensus of about $441M and 14c, respectively. JDSU's President and CEO Tom Waechter said, "Looking ahead to fiscal 2015, we believe there are strong market drivers across our three business segments, and that we are well positioned with differentiated products and solutions to support our customers as they transition to Software Defined Networks, Network Function Virtualization and more dependency on cloud infrastructure. We continue to lead in our core network and anti-counterfeiting markets and I am pleased with the momentum we are building in our commercial lasers business on the strength of our highly differentiated fiber laser product line." ANALYST OPINION: Following the company's report, B. Riley analyst Dave Kang cut his rating on JDSU shares to Neutral from a Buy rating, citing near-term uncertainties in the North American telecom market. Kang pointed to two events contributing to that uncertainty, namely an architectural shift to SDN, or Software Defined Networking, and AT&T's (T) planned merger with DirecTV (DTV). The analyst acknowledged previously underestimating the potential impact of the SDN shift on the telecom equipment industry and noted that appears to be impacting JDSU's NSE business more than its optical component unit. Kang prefers Finisar (FNSR) over JDSU given the current environment, noting that about 70% of Finisar's sales come from the datacom sector. Kang lowered his price target on JDS Uniphase shares to $11.75 from $15.50. Piper Jaffray analyst Troy Jensen also downgraded JDSU following its report, lowering his rating on the stock to Neutral from Overweight. Jensen also said the company's worse than expected guidance indicates softer Telco spending and he believes JDSU will have trouble showing significant revenue acceleration even if the optical upgrade cycle starts to ramp up. Piper lowered its price target on the stock to $12 from $14. OTHERS TO WATCH: Other providers of telecom equipment include Ciena (CIEN) and Infinera (INFN). PRICE ACTION: In morning trading, shares of JDSU fell $1.12, or 9.4%, to $10.78. Meanwhile, shares of Finisar were down nearly 2% to $19.58, Ciena slipped 1.5% to $18.92 and Infinera was fractionally higher at $9.09.

Earnings Watch: Analyst sentiment positive on AT&T ahead of Q2 resultsAT&T (T) is expected to report second quarter earnings after the market close on Thursday, July 23, with a conference call scheduled for 4:30 pm ET. AT&T is a global telecommunications company offering wireless and long distance services. EXPECTATIONS: Analysts are looking for earnings per share of 63c on revenue of $33.04B, according to First Call. The consensus range for EPS is 52c-67c on revenue of $32.51B-$33.84B. LAST QUARTER: AT&T reported first quarter adjusted EPS of 63c against estimates for 62c, on revenue of $32.58B against estimates for $32.84B. In Q1, the company reported the following: Wireless service revenues were down 3.7% to $14.81B; Phone-only postpaid ARPU decreased 9.6% versus the year-earlier quarter; Phone-only postpaid ARPU with AT&T Next monthly billings decreased 1.9% year over year, but increased 0.4% sequentially; Postpaid churn of 1.02%; 6.2M postpaid smartphone gross adds and upgrades in the quarter; 1.2M total wireless net adds, including 441,000 postpaid and 684,000 connected cars; 1.2M branded smartphones added to base, including 700,000 prepaid. AT&T noted its FY15 standalone guidance remained 'on track,' and said it expected the DirecTV (DTV) deal to close in Q2. STREET RESEARCH: Street research has been overwhelmingly positive in the weeks leading up to AT&T's Q2 earnings report with several firms issuing upgrades on the stock. On July 1, Oppenheimer raised their price target on AT&T to $40 from $36. Following AT&T's acquisition of DirecTV, Oppenheimer expects AT&T to benefit from cross-selling, new services, and higher wireless prices. The firm expects the company's free cash flow to be boosted by its winding down of Project VIP. The firm kept an Outperform rating on the stock. Also on July 1, Buckingham initiated AT&T with a Buy rating and $41 price target. On July 9, Stifel resumed coverage of AT&T with a Buy and $41.50 price target. PRICE ACTION: AT&Tís shares are up approximately 4% since the company's Q1 report. However, over the past 12 months, they are down about 5%. In afternoon trading ahead of tonightís Q2 report, AT&Tís shares are down 0.7%.

AT&T July weekly volatility elevated into Q2 and outlook AT&T July weekly call option implied volatility is at 30, August is at 17, September is at 16; compared to its 52-week range of 12 to 44, suggesting large near term price movement into the expected release of Q2 results on July 23.

AT&T announces Department of Justice completed review of acquisition of DirecTV AT&T (T) released the following statement "We are pleased the Department of Justice has completed its review of our acquisition of DIRECTV (DTV). We look forward to gaining the approval of the Federal Communications Commission so we can quickly begin providing consumers with the benefits of this combination."

FCC chairman proposes to approve AT&T-DirecTV deal with conditionsIn light of news reports concerning the proposed AT&T (T) and DirecTV (DTV) transaction, FCC chairman Tom Wheeler issued the following statement: "An order recommending that the AT&T-DirecTV transaction be approved with conditions has circulated to the commissioners... If the conditions are approved by my colleagues, 12.5M customer locations will have access to a competitive high-speed fiber connection. This additional build-out is about 10 times the size of AT&Tís current fiber-to-the-premise deployment... and more than triples the number of metropolitan areas AT&T has announced plans to serve. In addition, the conditions will build on the 'Open Internet Order' already in effect... First, in order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections. Second, in order to bring greater transparency to interconnection practices, the company will be required to submit all completed interconnection agreements to the Commission, along with regular reports on network performance... We will require an independent officer to help ensure compliance with these and other proposed conditions." Reference Link